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The question for mobile banking in India is not whether, but when. A string of parallel developments - greater bank innovation, broadband spread and user inclination - is providing new charge to mobile banking. There is still a long way to go before m-banking achieves mass acceptance, but it's on its way, reports ET.

Last month, HDFC bank, India's second-largest private-sector bank, launched two services on its mobile banking platform. The first was a Hindi banking service, which made accessible its 30-odd m-banking services-like transferring funds, stop-cheque requests and opening a fixed deposit-to account holders who prefer Hindi as a medium of communication.

The second was a feature called 'net safe light', which limits damages from credit-card misuse. An account holder with a credit-card limit of, say, Rs 5 lakh might hesitate to make a purchase of Rs 2,000 via mbanking. This new feature lets the account holder create a virtual credit card on the mobile for the transaction value-in this case, Rs 2,000.

This is a fair leap from where m-banking was when it started in India about five years ago-text alerts for cheque deposited or ATM withdrawals. The way the m-banking ecosystem is evolving, and the numbers they are adding, indicate banks in India are going mobile at a speed never seen before.

Sure, the small base exaggerates the change, but it is significant in that it shows a technology gradually permeating into the system. "There's an opportunity to leapfrog: take banking to the masses via mobile banking," says AP Hota, managing director & CEO, National Payments Corporation of India (NPCI), which, among other things, sews up back-end connections to enable m-banking.

Of its total customer base of 200 million, State Bank of India (SBI), the country's largest bank, has 5.2 million registered users for its mbanking services. "Two lakh new users are registering every month," says Thandapani G, deputy general manager, SBI. The bank's account holders do 90,000 transactions per day on mobile phones and did m-transfers of Rs 180 crore in November.

The same is true of leading private banks. Adds Rajiv Sabharwal, executive director, ICICI Bank, the country's largest private-sector bank: "We have seen a 100% growth in the number of people using mobile banking in past year. Transactions are up 300%." Out of HDFC Bank's 26 million account holders, 1.2 million use mobile banking, and this is increasing by 30% every quarter. And Sridhar Iyer of Citibank India says 63% of its customers are on m-banking.

"It is picking up, but we are still at least five years away from largescale mobile banking," says Murali Balaraman, partner, financial services, Ernst & Young.

"Today, mobile banking is a surrogate to busy schedules." What Balaraman means is that it is the preserve of the urban user with a smartphone, who is comfortable with Internet banking, and is graduating to m-banking. The real adoption would be when the masses, urban and rural, take to it.

THE CASE FOR M-BANKING

In a country like India, where there are only 90,000 bank branches and banking services reach only about 40% of the population, the need to open more branches is compelling. Mobile banking, backed by a robust banking-correspondent architecture, overrides the need to set up more branches. "Mobile banking will help lot of customers who are financially excluded," says Sabharwal.

It also works for banks because a physical bank is expensive. According to Thandapani, renting, staffing and running expenses account for 40-60% of a branch's total cost, with IT systems making up most of the rest. "The bank branch is 10 times more expensive than reaching out to the bank on a handset," says Sridhar Iyer, director, digital business, Citibank India.

In some transactions, the price difference is more pronounced. Thandapani of SBI says that it costs his bank Rs 45 to start a fixed deposit in a branch, but just 38 paise via a mobile banking app. "The transaction costs on mobiles make it very attractive," he says.

M-banking has grown in tandem with mobile technology itself. Around the turn of the century, some banks like Citibank started sending mobile alerts if a customer asked for them. A year later, they began sending this anyway. More services were added.

Another development that contributed to the acceleration was the inter-bank mobile payment service (IMPS), set up by NPCI. It enabled transfers between banks that were hooked up on IMPS. More importantly, it enabled users to do transactions using basic phones, through an SMS-based menu. The limitation of IMPS is a transaction limit of Rs 5,000 per day (there's no limit for customers using a banking app).

THE NEXT LEAP

As of November 30, 75 banks had a mobile banking licence from the Reserve Bank of India, the sector regulator, and 53 were offering mbanking. A typical m-banking menu, today, includes fund transfer, opening deposits, paying utility bills, e-commerce and service requests. "Bank branches will not go away, but repetitive, low-value transactions and money transfers will be pushed to mobile devices," says Haragopal M, head of Finacle, Infosys' banking software.

Birendra Sahu of HDFC Bank feels two things need to happen for mass adoption. The first is simpler devices. Less than 20% mobile users use a smart phone; and most users still find it complicated to use a mobile app and a mobile browser. The second is creating greater awareness of the service and its security features. Adds Thandapani of SBI: "Users will graduate to services beyond alerts once they are comfortable about security. We see low-end cash management happen on mobiles."

Banks are currently targeting first movers, who have smart phones, do Internet banking and are familiar with the medium. "As networks improve, more customers will come on the digital medium," says Sahu, senior executive vice-president, direct banking channels and premier banking, HDFC Bank. "Even loans will be approved via mobile phones within five years. For this, we need to put measures to accept digital signatures in place."

Hota of NPCI believes the relationship between banks and telecom companies relationship has not developed for a mass adoption of mobile banking (See adjoining story). Meanwhile, another policy change being given new legs could expand the scope of possibilities for mobile banking.

Aadhaar-enabled cash transfers of welfare services will promote a whole new banking architecture- electronic transfers, roving banking agents, biometric authentication- that will take banking to the masses. "The unbanked population uses very basic phones," says Balaraman of E&Y.

"Besides, mobile banking is too cumbersome for the population who will receive cash for subsidies." He believes new models will emerge and technology will stabilise, making it easier to use mobile accounts. Increasingly, the question is becoming not whether, but when.